Chapter 9

Chapter 9 - Chapter 9 Cooperative Strategy Cooperative...

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Chapter 9 Cooperative Strategy Cooperative Strategy A cooperative strategy is a strategy in which firms work together to achieve a shared objective. Cooperative strategy is the third major alternative (internal growth and mergers and acquisitions are the other two) firms use to grow, develop value-creating competitive advantages, and create differences between them and competitors. Thus, cooperating with other firms is another strategy that is used to create value for a customer that exceeds the cost of creating that value and to create a favorable position in the marketplace relative to the five forces of competition (see Chapters 2 and 4). A collusive strategy is a cooperative strategy through which two or more firms cooperate to raise prices above the fully competitive level. Note: A more extreme form of collusion exists. Explicit collusion (which is illegal in the United States and most developed economies, except in regulated industries) exists when one firm negotiates a production output and pricing agreement with another firm in an effort to reduce competition. Used more frequently than explicit collusion, tacit collusion is considered later in the chapter in the discussion of business-level cooperative strategies. STRATEGIC ALLIANCES AS A PRIMARY TYPE OF COOPERATIVE STRATEGY A strategic alliance is a partnership between firms whereby their resources and capabilities are combined to create a competitive advantage. Many firms, especially large global competitors, establish multiple strategic alliances. As described in the Opening Case, IBM has formed alliances with Sun Microsystems, SAP, Lenovo, and Cisco, among others. The goal with each cooperative relationship is different and very specific. In general, strategic alliance success requires cooperative behavior from all partners. Actively solving problems, being trustworthy, and consistently pursuing ways to combine partners’ resources and capabilities to create value are examples of cooperative behavior known to contribute to alliance success. Three Types of Strategic Alliances Three types of strategic alliances: joint ventures, equity strategic alliances, and nonequity strategic alliances. A joint venture is an alliance where a new, independent firm is formed from two or more partners, with each partner firm contributing some of their resources and capabilities. Joint ventures are effective in establishing long-term relationships and in transferring tacit knowledge. Because it can’t be codified, tacit knowledge is learned through experiences such as those taking place when people from partner firms work together in a joint venture.
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An equity strategic alliance is an alliance where partner firms own unequal shares of equity in a venture formed by combining some of their resources and capabilities to create a competitive advantage. For example, Citigroup Inc. has formed a strategic alliance with Shanghai Pudong Development Bank Co. through an equity investment totaling 25 percent. This equity strategic alliance served as a launch pad for
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Chapter 9 - Chapter 9 Cooperative Strategy Cooperative...

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